In 2018, funds raised from initial coin offerings (ICOs) fell dramatically from over USD 1 and a half billion in January, to under USD 75 million in December.
However, new data showing the activities of the month of May so far indicates that investor faith has begun to regain strength in the light of increasingly highly-rated ICO projects, with 85% of the total projects receiving a high rating between 3-3.5 stars. This is a significant increase, even from April 2019 which claimed an average of just 68% of projects gaining this trusted star rating.
As many viewed ICOs and similar token events as a groundbreaking new way to fund startup projects in the blockchain space, the slow fizzle out of popularity last year was highly disappointing. It seemed to be that these token offerings had collapsed under the weight of up to 80% scam projects flooding the market, as well as crashing prices across nearly all cryptocurrency.
ICO bench data shows that 157 ICOs have been launched in May so far, expanding the total number of published projects to 5,512. There are currently 287 ongoing ICOS, with a further 140 expected in the near future.
A summary of the ICObench ICO Market Half-Monthly Analysis May 2019 report can be accessed for free with a trial subscription on the platform.
Moving away from the established model
Trends away from the established ICO model are likely in reaction to the poor quality and trust standards that became prominent amongst ICOs, beginning in 2017.
The month of May 2019 has so far been overwhelmed by Bitfinex’s USD 1 billion initial exchange offering (IEO) — a relatively new model available to investors where they can participate in a centralized cryptocurrency exchange’s token offering. The exchange involved operates the sales, vetting both the project and prospective investors.
Bitfinex’s IEO has contributed significantly towards this month’s roughly USD 1.075 billion collected in token sales — the highest total funds raised in 2019 to date.
This year has also seen a rise in popularity of security token offerings (STOs). STOs claim to offer a more trusted model than the ICO as the security token issued to investors represents an investment contract, acting similar to ownership information given to investors in the stocks or bonds, just recorded on the blockchain via the token instead.
STOs can be seen as a lower risk than ICOs because they are protected by securities laws that the tokens must comply with, legally enforcing transparency and accountability from the project behind the token.
STOs raised USD 1 and a half million in March 2019; this figure jumps up to over USD 5 and a half million in May so far.
Indeed, because active ICOs have a higher average trust rating than one year ago, it enforces greater trust in investments made across the cryptocurrency market.
The move towards alternative token investment models such as STOs and IEOs could certainly be one reason investors are regaining trust in early blockchain project investment. However, May’s bullish market performance could certainly have also had a great impact on the number of investors willing to participate in token offerings.
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